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Topic: Any other way out? (Read 1744 times)

Hi - i wondered if anyone could give me some advice before i take the plunge to bankruptsy. I owe £25K on credit cards. I accrue £500 per month on interest - and can only really afford a total repayment of £800 / month - which i do. At this rate i will owe this money for the next 10 years.

Last July i was referred to a solicitor by an aquaintence. The solicitor told me he could get the debt written of using 'unenforceable credit agreements'. Great - just have the debt go away. They told me this would be complete by Xmas, so i paid £2k upfront and singed on the dotted line. However now they are say at least the end of this year. So i took some advice last week on this unenforecable agreement - and apparently it doesnt write the debt off, only means the credit card companies cant take me to court. Thats assuming they win.

I spoke to the solicitors who said said i cant make any of my own arrangements with the credit card companies - or i breech my contract with them, and i'm liable for all their costs - up to £40k. All i can do is pay off the balance - but leave the accounts open and let the solictors go to court for a fiver - or do nothing.

So i came to the conclusion of quitting my job and going bankrupt. My partner happy to support me - i dont have assets or dependants. I cant go on just paying off interest every month and never changing my position. I need a fresh start. But i am scared of bankrupsy. With the money i pay on the cards i could afford a mortgage. which is a long time away if i proceed.

I just dont know what to do.

What i need is an interest free loan - which i know doesnt exist - but there must be another way i can freeze the interest - and actually repay the debt - not the interest.

I don't have a clue where you have been getting advice.... But it seems you have seriously been around the houses.

Here are your alternatives to bankruptcy.

1) Debt Management2) An IVA.

The reason these are options is simply down to one thing. You have a high disposable income of £800 per month.

If you entered into debt management... There is a high possibility the interest could be frozen. (This is not a guarantee). This would therefore mean that based upon the interest being frozen, you could pay off the £25,000 in clumps of £800. (Payplan and the CCCS do not charge a service fee). This could therefore be paid off 31.25 months. Which is 2 years 8 months. Assuming interest is not completely frozen with all credit cards... I suggest adding 50% to this figure, and in roughly 4 years you could be debt free.

If you entered into an IVA... You would enter into a formal arrangement with your creditors, declaring yourself insolvent (the same as bankruptcy... they are both goverened by the insolvency act of 1986). You would agree to pay £800 a month for the next 5 years. Your debts would be paid, and any remaining debt (once Insolvency practicioner fees, setup fees, company fees, and any other fees they can think of creating are paid). The interest is frozen in this solution to allow a maximum fee whilst writing off your debts. The positive? You would be debt free in 5 years.

If you entered into bankruptcy.... You would have all your debts erased. You would lose the assets that you do not have (hardly a huge loser). You would be placed into something called an income payment agreement (as you have a high disposable income), that would equate to 70% of your disposable income, every month for 3 years. 70% of £800 is £560 a month. Therefore... the end result would be you could keep your job... Pay £560 a month and be completely debt free in 3 years. Bankruptcy therefore I believe is faster... And you lose nothing.

The only reasons you would choose an IVA over bankruptcy is... If you have a job you feel you would lose if you went bankrupt (check your contract) or you have assets you need to protect (as you do not lose these in an IVA). Financially... It's a no brainer.

I hope this helps... Do not hesitate to [** sorry, no personal contact invitations allowed **] further on here.

Fear is caused by lack of knowledge. Knowledge is power. I have a full understanding of all debt solutions and therefore can give you further advice.

Hi - Thanks so much for your reply - my only question - i spoke to one of these debt companies you see on the TV who said that i would be under the bankruptcy order for 12 months, then declare for 6 years. Is this not the case?

Also i do feel that if i go bankrupt then i will leave my job. eg have no disposable income. Will this cause problems?

Having been there, I can relate to your frustration with wanting to get out of this situation.I found when dealling with banks and financial institutions, at times it felt very degrading as they have the upper hand and often they aren't afraid to show it.

The biggest lesson I learnt was 'Time' must become your friend as these situations don't get solved overnight.

Goal setting is a valuable asset as detailing your income and outgoings and possibly doing a forecast/budget for the next few years will allow you to see the whole picture of how you can get out of this and when the light at the end of the tunnel will shine brighter.Once you have the 'Big' picture so to speak, it will allow you to start/continue down the road to freedom from this and allow you to concentrate on other things in life like, how can I increase my income thus speeding up my repayments and getting me to my target faster.Any extra income you can source, pick the smallest of your bills and make that the target/goal to pay off first.Do not spread your total repayment amount across all bills, but pay minimum on all and balance on the smallest one.The feeling of relief you will feel when one is fully paid will empower you to finalise the next one, and the next one, and so on until you are totally free.

I wish you the best of luck, knowing you aren't alone as there are many more out there going through the exact same as you.

Very positive advice Neil, not sure if it helps Minusi though as it still involves remaining in debt for a long long time. I would suggest money management as something to look at once the debts are cleared. That way creating a method by which these problems dont occur in the future.

I understand that you feel that quitting your job in bankruptcy would avoid the IPA and therefore is your only option. It's not. Look at the positive... £560 a month means that you get to keep £240 a month...

Now, when you look at other expenditures you may not have thought of... such as £30 a month being a legal entitlement for holiday savings... £20 a month for family gifts and xmas presents... your disposable income drops by £50 just like that!!! Suddenly you only have £750 a month DI. The more legal expenses you add on... the less your DI and the less you pay.... Therefore, having an expert writing your petition may result in keeping your job being viable?

Great advice as always, Raph. Minusi, look at getting some advice from a company that specialises in assisted bankruptcy. Make sure that the fee that you pay them is reasonable. By the time that they have 'allowed' all of the expenditure listed in the Insolvency Service recommendations (Dry Cleaning, Hairdressers etc), you will bring your disposable income down substantially. This will reduce the amount that you have to pay to the Official Receivers by way of IPA. Maybe £450.00 per month leaving you £350.00 a month better off.

haha Soverign, love it. I could not have put forward the service more elloquently or distinctly. Maximising legally your expenditure and therefore minimising your disposable income, therefore illustrating to the official receiver that you cannot afford to pay Completely legal, VERY ethical, and saving you money!

What I cannot stand... Is the fact that you can get 2 people. Completely the same people. Same income. Same expenses. But one does it themselves without the knowledge of what they can claim for. The other does it with the knowledge. One ends up paying £300 a month, the other pays nothing..... Knowledge unfortunately is power and a huge asset that bankruptcy cannot take from you